Get Bespoke’s 2017 Outlook Report with a 30-day free trial to Bespoke’s premium research! Click here to learn more.
The Dow Jones Industrial Average has now closed in “overbought” territory (more than one standard deviation above its 50-day moving average) for 24 consecutive trading days, which is also the number of trading days we have seen since Election Day. Below is a chart showing consecutive “overbought” closes for the Dow since the current bull market began back on March 9th, 2009. As shown, while 24 consecutive “overbought” days is one of the longer streaks we’ve seen over the last 8 years, there have actually been 9 streaks that have gone on longer.
While the Dow’s current streak of consecutive “overbought” days is only the 10th longest streak of the bull market at the moment, it’s likely going to last quite a bit longer because of just how extended the index still is. Below is a chart showing the number of standard deviations that the Dow has traded above or below its 50-DMA on a daily basis since March 2009. As shown, the post-election surge recently took the index to its most overbought level of the entire bull market when it crossed above three standard deviations. Even through yesterday, the Dow was still more than 2.25 standard deviations above its 50-DMA, so it’s now going to take either a significant drop or a multi-week period of sideways trading for the index to move from “overbought” back to “neutral.” One way or the other, though, this streak will end.